Form 8-K AMERICAN INTERNATIONAL For: Feb 08

February 8, 2018 4:34 PM

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 8, 2018

 

 

AMERICAN INTERNATIONAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-8787   13-2592361

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

175 Water Street

New York, New York 10038

(Address of principal executive offices)

Registrant’s telephone number, including area code: (212) 770-7000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Section 2 — Financial Information

 

Item 2.02. Results of Operations and Financial Condition.

On February 8, 2018, American International Group, Inc. (the “Company”) issued a press release reporting its results for the quarter and year ended December 31, 2017. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Section 8 — Other Events

 

Item 8.01. Other Events.

On February 8, 2018, the Company issued a press release announcing that its Board of Directors has declared a cash dividend on its common stock, par value $2.50 per share, of $0.32 per share. A copy of the press release is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein.

Section 9 — Financial Statements and Exhibits

 

Item 9.01. Financial Statements and Exhibits.

 

(d)    Exhibits.
99.1    Press release of American International Group, Inc. dated February 8, 2018.
99.2    Press release of American International Group, Inc. dated February 8, 2018.


EXHIBIT INDEX

 

Exhibit
No.
  

Description

99.1    Press release of American International Group, Inc. dated February 8, 2018.
99.2    Press release of American International Group, Inc. dated February 8, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

AMERICAN INTERNATIONAL GROUP, INC.

(Registrant)

Date: February 8, 2018     By:  

/s/ James J. Killerlane III

     

Name:    James J. Killerlane III

Title:      Associate General Counsel and Assistant Secretary

Exhibit 99.1

 

LOGO   

FOR IMMEDIATE RELEASE                

 

Press Release

AIG

175 Water Street

New York, NY

10038

www.aig.com

  

Contacts:

  

Liz Werner (Investors): 212-770-7074; elizabeth.werner@aig.com

  

Fernando Melon (Investors): 212-770-4630; fernando.melon@aig.com

  

Daniel O’Donnell (Media): 212-770-3141; daniel.odonnell@aig.com

  

Matt Gallagher (Media): 212-458-3247; matthew.gallagher2@aig.com

AIG REPORTS FOURTH QUARTER 2017 RESULTS

NEW YORK, February 8, 2018 - American International Group, Inc. (NYSE: AIG) today reported a net loss of $6.7 billion, or $7.33 per share, for the fourth quarter of 2017, compared to a net loss of $3.0 billion, or $2.96 per share, in the prior-year quarter. The fourth quarter of 2017 net loss included a charge of $6.7 billion related to the enactment of the Tax Cuts and Jobs Act (the Tax Act). Adjusted after-tax income was $526 million, or $0.57 per diluted share, for the fourth quarter of 2017, compared to an adjusted after-tax loss of $2.8 billion, or $2.72 per share, in the prior-year quarter.

“The fourth quarter was another important step forward in positioning AIG for the future. Since I joined the company in May, we’ve added to our talent base, assessed and initiated underwriting actions, and established a new operating structure. 2017 represents a starting point from which we expect to build and 2018 will be a year of execution. Our actions to diversify our business and pursue profitable growth were further reflected in our January announcement of the acquisition of Validus,” said Brian Duperreault, President and Chief Executive Officer.

“Our fourth quarter and full year 2017 results were significantly impacted by catastrophe losses. Despite full year record catastrophe losses of $4.2 billion, we delivered approximately $1.5 billion in pre-tax income and over $3.0 billion in adjusted pre-tax income. Importantly, our fourth quarter reserve review resulted in modest net adverse development and our General Insurance North America Commercial business showed notable improvement and reserve stability. Personal Insurance and Life and Retirement operations continued to deliver solid performance and benefit from their diversified offerings.”

FOURTH QUARTER AND FULL YEAR 2017 HIGHLIGHTS

General Insurance Results – Fourth quarter adjusted pre-tax income of $13 million included $762 million of catastrophe losses, of which $572 million related to the wildfires in California. North America adjusted pre-tax income of $412 million was offset by an International adjusted pre-tax loss of $399 million. The fourth quarter reflected modest net prior year adverse loss reserve development of 1.4 points, driven by International Commercial lines. The fourth quarter and full year of 2017 loss ratios were 78.3 and 83.2, respectively. The accident year loss ratio, as adjusted was 65.2, a 2.3 point improvement compared to the prior year quarter. For the full year, the accident year loss ratio, as adjusted was 63.0, a 1.1 point increase from a year ago.

 

1


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

Life and Retirement Results – Fourth quarter adjusted pre-tax income of $782 million included a charge of approximately $90 million for adjustments, primarily within Individual Retirement and Group Retirement, due to the ongoing modernization of actuarial systems and related model refinements. The fourth quarter of 2017 reflected higher fee income for Individual Retirement and Group Retirement due to historically high assets under administration driven by equity market performance and higher base net investment spread in Variable and Index Annuities, as well as Group Retirement. Full year base net investment spread for Fixed Annuities remained essentially flat with the prior year despite the impact of spread compression from reinvesting at lower rates.

Legacy – Fourth quarter adjusted pre-tax income of $411 million, compared to $1.1 billion in the prior year quarter, included higher than expected investment returns. The fourth quarter of 2016 included a pre-tax gain of $1.1 billion from the sale of commercial real estate in South Korea offset by unfavorable prior year loss reserve development.

AIG recently formed a Bermuda-domiciled legal entity named DSA Reinsurance Company, Ltd. (DSA Re) to act as AIG’s main run-off reinsurer. DSA Re’s primary purpose is to reinsure AIG’s Legacy Life and Retirement and Legacy General Insurance run-off lines. DSA Re will allow AIG to derive operational efficiencies by consolidating its legacy books in one legal entity and under one management team, while continuing to honor all policyholder commitments and client relationships. The amount expected to be reinsured upon receipt of all regulatory approvals represents approximately $37 billion or over 80% of Legacy total insurance reserves and will be backed with approximately $40 billion of invested assets managed by AIG Investments.

Since its establishment, Legacy has returned $10.0 billion of capital to AIG Parent, surpassing its original goal of $9.0 billion. Total book value impairments and losses on sales from Legacy investments that were sold from September 1, 2015 through December 31, 2017 totaled $1.0 billion.

Capital and Liquidity – In the fourth quarter of 2017, AIG Parent received approximately $290 million in dividends in the form of cash and fixed maturity securities from its Life and Retirement companies, as well as $2.0 billion associated with Legacy asset monetizations, including net proceeds of $1.1 billion from the sale of AIG’s remaining life settlements contracts. AIG Parent reimbursed $1.2 billion in the quarter to its insurance companies as a result of adjustments made to tax sharing payments during the year. At the end of 2017, Parent liquidity stood at $7.3 billion.

Validus Holdings Ltd. – On January 21, 2018 AIG entered into an agreement to acquire Validus Holdings Ltd., a leading provider of reinsurance, primary insurance and asset management services, for $5.6 billion in cash. This transaction will strengthen AIG’s global General Insurance business by expanding its current product portfolio through additional distribution channels and advancing the tools available for underwriting. The transaction is expected to close in mid-2018 and is subject to obtaining the relevant regulatory approvals and other customary closing conditions.

 

2


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

FOURTH QUARTER FINANCIAL SUMMARY*

 

     Three Months Ended
December 31,
 

($ in millions, except per share amounts)

   2017     2016  

Net income (loss)

   $ (6,660   $ (3,041

Net income (loss) per diluted share (a)

   $ (7.33   $ (2.96

Adjusted after-tax income (loss)

   $ 526     $ (2,787

Adjusted after-tax income (loss) per diluted share (a)

   $ 0.57     $ (2.72

Return on equity

     (38.7 )%      (14.7 )% 

Adjusted return on equity

     4.2     (18.2 )% 

Adjusted return on attributed equity - Core

     2.6     (22.9 )% 

Book value per common share

   $ 72.49     $ 76.66  

Book value per common share, excluding accumulated other comprehensive income

   $ 66.41     $ 73.41  

 

* Refer to the Comments on Regulation G and the tables that follow for a discussion of non-GAAP financial measures and the reconciliations of the non-GAAP financial measures to GAAP measures.
(a) For periods reporting a loss, basic average common shares outstanding are used to calculate net income (loss) per diluted share.

All comparisons are against the fourth quarter of 2016, unless otherwise indicated. Refer to the AIG Fourth Quarter 2017 Financial Supplement, which is posted on AIG’s website in the Investor Information section, for further information.

GENERAL INSURANCE

 

     Three Months Ended December 31,  

($ in millions)

   2017      2016      Change  

Total General Insurance

        

Net premiums written

   $ 5,892      $ 6,512        (10 )% 

Underwriting income (loss)

   $ (846    $ (5,852      86  

Adjusted pre-tax income (loss)

   $ 13      $ (4,847      NM  

Underwriting ratios:

        

Loss ratio

     78.3        146.7        (68.4 )pts 

Impact on loss ratio:

        

Catastrophe losses and reinstatement premiums

     (11.7      (5.4      (6.3

Prior year development

     (1.4      (73.8      72.4  

Accident year loss ratio, as adjusted

     65.2        67.5        (2.3

Expense ratio

     35.0        35.8        (0.8

Combined ratio

     113.3        182.5        (69.2

Accident year combined ratio, as adjusted

     100.2        103.3        (3.1

 

3


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

General Insurance - North America

 

     Three Months Ended December 31,  

($ in millions)

   2017     2016     Change  

North America

      

Net premiums written

   $ 2,583     $ 3,008       (14 )% 

Commercial Lines

     1,808       2,236       (19

Personal Insurance

     775       772       —    

Underwriting income (loss)

   $ (316   $ (5,288     94  

Commercial Lines

     16       (5,294     NM  

Personal Insurance

     (332     6       NM  

Adjusted pre-tax income (loss)

   $ 412     $ (4,406     NM  

Underwriting ratios:

      

North America

      

Loss ratio

     83.0       237.6       (154.6 )pts 

Impact on loss ratio:

      

Catastrophe losses and reinstatement premiums

     (24.5     (7.6     (16.9

Prior year development

     3.3       (152.8     156.1  

Accident year loss ratio, as adjusted

     61.8       77.2       (15.4

Expense ratio

     28.5       27.5       1.0  

Combined ratio

     111.5       265.1       (153.6

Accident year combined ratio, as adjusted

     90.3       104.7       (14.4

North America Commercial Lines

      

Loss ratio

     73.9       294.8       (220.9 )pts 

Impact on loss ratio:

      

Catastrophe losses and reinstatement premiums

     (12.0     (8.2     (3.8

Prior year development

     4.9       (202.3     207.2  

Accident year loss ratio, as adjusted

     66.8       84.3       (17.5

Expense ratio

     25.3       23.9       1.4  

Combined ratio

     99.2       318.7       (219.5

Accident year combined ratio, as adjusted

     92.1       108.2       (16.1

North America Personal Insurance

      

Loss ratio

     108.0       60.5       47.5 pts 

Impact on loss ratio:

      

Catastrophe losses and reinstatement premiums

     (58.6     (5.5     (53.1

Prior year development

     (1.1     —         (1.1

Accident year loss ratio, as adjusted

     48.3       55.0       (6.7

Expense ratio

     37.5       38.7       (1.2

Combined ratio

     145.5       99.2       46.3  

Accident year combined ratio, as adjusted

     85.8       93.7       (7.9

 

    Net premiums written decreased by 14%, primarily due to continued execution of our strategic portfolio actions in North America Commercial Lines Casualty and Property lines of business.

 

4


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

    The reduction in the North America loss ratio was driven by the fourth quarter 2016 reserve additions. The 15.4 point improvement in the accident year loss ratio, as adjusted primarily reflects the impact of adjustments to the loss estimates that were made in the fourth quarter of 2016, as well as pricing and underwriting actions, and recoveries from reinsurance on severe losses.

 

    Adjusted pre-tax income of $412 million included $682 million of catastrophe-related losses, which were primarily related to the California wildfires and largely impacted Personal Insurance. Favorable loss reserve development of $97 million was primarily due to improvement in North America Commercial Lines.

General Insurance - International

 

     Three Months Ended December 31,  

($ in millions)

   2017     2016     Change  

International

      

Net premiums written

   $ 3,309     $ 3,504       (6 )% 

Commercial Lines

     1,422       1,466       (3

Personal Insurance

     1,887       2,038       (7

Underwriting income (loss)

   $ (530   $ (564     6  

Commercial Lines

     (603     (647     7  

Personal Insurance

     73       83       (12

Adjusted pre-tax loss

   $ (399   $ (441     10  

Underwriting ratios:

      

International

      

Loss ratio

     74.7       71.9       2.8 pts 

Impact on loss ratio:

      

Catastrophe losses and reinstatement premiums

     (2.2     (3.5     1.3  

Prior year development

     (4.8     (8.9     4.1  

Accident year loss ratio, as adjusted

     67.7       59.5       8.2  

Expense ratio

     39.8       42.5       (2.7

Combined ratio

     114.5       114.4       0.1  

Accident year combined ratio, as adjusted

     107.5       102.0       5.5  

International Commercial Lines

      

Loss ratio

     98.0       97.9       0.1 pts 

Impact on loss ratio:

      

Catastrophe losses and reinstatement premiums

     (2.7     (7.7     5.0  

Prior year development

     (11.4     (20.0     8.6  

Accident year loss ratio, as adjusted

     83.9       70.2       13.7  

Expense ratio

     37.7       38.2       (0.5

Combined ratio

     135.7       136.1       (0.4

Accident year combined ratio, as adjusted

     121.6       108.4       13.2  

 

5


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

     Three Months Ended December 31,  

($ in millions)

   2017      2016      Change  

International Personal Insurance

        

Loss ratio

     54.6        49.8        4.8 pts 

Impact on loss ratio:

        

Catastrophe losses and reinstatement premiums

     (1.8      (0.1      (1.7

Prior year development

     0.8        0.7        0.1  

Accident year loss ratio, as adjusted

     53.6        50.4        3.2  

Expense ratio

     41.7        46.3        (4.6

Combined ratio

     96.3        96.1        0.2  

Accident year combined ratio, as adjusted

     95.3        96.7        (1.4

 

    Net premiums written decreased 6% on a reported basis primarily driven by divestitures and risk selection strategy in Europe in International Commercial Lines and strategic country exits for Personal Insurance.

 

    The loss ratio increased 2.8 points to 74.7 in the fourth quarter of 2017. The accident year loss ratio, as adjusted increased 8.2 points to 67.7 primarily due to continued remediation efforts of International Commercial Lines in Europe.

 

    Adjusted pre-tax loss of $399 million was largely due to the strengthening of reserves and loss estimates in International Commercial Lines.

LIFE AND RETIREMENT

 

     Three Months Ended December 31,  

($ in millions)

   2017      2016      Change  

Life and Retirement

        

Premiums & Fees

   $ 2,123      $ 1,186        79

Net Investment Income

     2,003        1,983        1  

Adjusted Revenue

     4,382        3,388        29  

Benefits, losses and expenses

     3,600        2,522        43  

Adjusted pre-tax income

     782        866        (10

Individual Retirement

        

Premiums & Fees

   $ 210      $ 215        (2 )% 

Net Investment Income

     1,030        1,010        2  

Adjusted Revenue

     1,415        1,376        3  

Benefits, losses and expenses

     941        834        13  

Adjusted pre-tax income

     474        542        (13

Net flows

     (422      (321      (31

Group Retirement

        

Premiums & Fees

   $ 120      $ 104        15

Net Investment Income

     550        558        (1

Adjusted Revenue

     732        716        2  

Benefits, losses and expenses

     486        455        7  

Adjusted pre-tax income

     246        261        (6

Net flows

     (453      (533      15  

 

6


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

     Three Months Ended December 31,  

($ in millions)

   2017      2016      Change  

Life Insurance

        

Premiums & Fees

   $ 732      $ 679        8

Net Investment Income

     263        263        —    

Adjusted Revenue

     1,013        956        6  

Benefits, losses and expenses

     1,011        966        5  

Adjusted pre-tax income (loss)

     2        (10      NM  

Institutional Markets

        

Premiums & Fees

   $ 1,061      $ 188        464

Net Investment Income

     160        152        5  

Adjusted Revenue

     1,222        340        259  

Benefits, losses and expenses

     1,162        267        335  

Adjusted pre-tax income

     60        73        (18

 

    In Individual Retirement, premiums and policy fees remained constant and were partially offset by an increase in reserve adjustments. Spreads continued to see compression from lower reinvestment rates. Base net investment spreads benefited from unexpected accretion income for Fixed Annuities and growth in Index Annuities. Overall net flows continued to be negative reflecting the regulatory uncertainties and disruption in the industry, partially offset by inflows to Index Annuities.

 

    In Group Retirement, higher reserve adjustments for Index and Variable Annuities and lower alternative investment income from lower average assets were partially offset by higher fee income and base net investment spread. Spreads continued to see compression from the current investment environment. Base net investment spread benefitted from unexpected accretion income and a cumulative update to cost of funds. Group Retirement negative net flows improved slightly due to lower individual surrenders.

 

    In Life Insurance, strong growth in premiums, and premiums and deposits, in universal life and term life and were partially offset by elevated mortality.

 

    In Institutional Markets, strong growth in pension risk transfer contributed to higher assets under management and an increase in net investment spread.

CONFERENCE CALL

AIG will host a conference call tomorrow, Friday, February 9, 2018 at 8:00 a.m. ET to review these results. The call is open to the public and can be accessed via a live listen-only webcast in the Investor Relations section of www.aig.com. A replay will be available after the call at the same location.

#        #        #

Additional supplementary financial data is available in the Investor Relations section at www.aig.com.

 

7


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

The conference call (including the conference call presentation material), the earnings release and the financial supplement may include, and officers and representatives of AIG may from time to time make, projections, goals, assumptions and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions and statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections, goals, assumptions and statements include statements preceded by, followed by or including words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “focused on achieving,” “view,” “target,” “goal” or “estimate.” These projections, goals, assumptions and statements may address, among other things, AIG’s:

 

    exposures to subprime mortgages, monoline insurers, the residential and commercial real estate markets, state and municipal bond issuers, sovereign bond issuers, the energy sector and currency exchange rates;

 

    exposure to European governments and European financial institutions;

 

    strategy for risk management;

 

    actual and anticipated sales, monetizations and/or acquisitions of businesses or assets, including AIG’s ability to successfully consummate the purchase of Validus Holdings, Ltd.;

 

    restructuring of business operations, including anticipated restructuring charges and annual cost savings;

 

    generation of deployable capital;

 

    strategies to increase return on equity and earnings per share;

 

    strategies to grow net investment income, efficiently manage capital, grow book value per common share, and reduce expenses;

 

    anticipated organizational, business and regulatory changes;

 

    strategies for customer retention, growth, product development, market position, financial results and reserves;

 

    management of the impact that innovation and technology changes may have on customer preferences, the frequency or severity of losses and/or the way AIG distributes and underwrites its products;

 

    segments’ revenues and combined ratios; and

 

    management succession and retention plans.

It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements.

Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include:

 

    changes in market conditions;

 

    negative impacts on customers, business partners and other stakeholders;

 

    the occurrence of catastrophic events, both natural and man-made;

 

    significant legal, regulatory or governmental proceedings;

 

8


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

    the timing and applicable requirements of any regulatory framework to which AIG is subject, including as a global systemically important insurer;

 

    concentrations in AIG’s investment portfolios;

 

    actions by credit rating agencies;

 

    judgments concerning casualty insurance underwriting and insurance liabilities;

 

    AIG’s ability to successfully manage Legacy portfolios;

 

    AIG’s ability to successfully reduce costs and expenses and make business and organizational changes without negatively impacting client relationships or its competitive position;

 

    AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets including AIG’s ability to successfully consummate the purchase of Validus Holdings, Ltd.;

 

    judgments concerning the recognition of deferred tax assets;

 

    judgments concerning estimated restructuring charges and estimated cost savings; and

 

    such other factors discussed in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in AIG’s Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2017, June 30, 2017 and March 31, 2017, Part II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year ended December 31, 2016 and Part II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year ended December 31, 2017 (which will be filed with the SEC).

AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projections, goals, assumptions, or other statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

#        #        #

COMMENT ON REGULATION G

Throughout this press release, including the financial highlights, AIG presents its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. Some of the measurements AIG uses are “non-GAAP financial measures” under Securities and Exchange Commission rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures AIG presents may not be comparable to similarly-named measures reported by other companies. The reconciliations of such measures to the most comparable GAAP measures in accordance with Regulation G are included within the relevant tables or in the Fourth Quarter 2017 Financial Supplement available in the Investor Information section of AIG’s website, www.aig.com.

Book Value per Common Share, Excluding Accumulated Other Comprehensive Income (AOCI) and Book Value per Common Share, Excluding AOCI and Deferred Tax Assets (DTA) (Adjusted Book Value per Common Share) are used to show the amount of AIG’s net worth on a per-share basis. AIG believes these measures are useful to investors because they

 

9


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

eliminate items that can fluctuate significantly from period to period, including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. These measures also eliminate the asymmetrical impact resulting from changes in fair value of AIG’s available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. AIG excludes deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in these book value per common share metrics. Book value per common share, excluding AOCI, is derived by dividing Total AIG Shareholders’ equity, excluding AOCI, by total common shares outstanding. Adjusted Book Value per Common Share is derived by dividing Total AIG shareholders’ equity, excluding AOCI and DTA (Adjusted Shareholders’ Equity), by total common shares outstanding.

AIG Return on Equity – Adjusted After-tax Income Excluding AOCI and DTA (Adjusted Return on Equity) is used to show the rate of return on shareholders’ equity. AIG believes this measure is useful to investors because it eliminates items that can fluctuate significantly from period to period, including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of AIG’s available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. AIG excludes deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in Adjusted Return on Equity. Adjusted Return on Equity is derived by dividing actual or annualized adjusted after-tax income attributable to AIG by average Adjusted Shareholders’ Equity.

Core Adjusted Attributed Equity is an attribution of total AIG Adjusted Shareholders’ Equity to these segments based on AIG’s internal capital model, which incorporates the segments’ respective risk profiles. Adjusted attributed equity represents AIG’s best estimates based on current facts and circumstances and will change over time.

Core Return on Equity – Adjusted After-tax Income (Adjusted Return on Attributed Equity) is used to show the rate of return on Adjusted Attributed Equity. Adjusted Return on Attributed Equity is derived by dividing actual or annualized Adjusted After-tax Income by Average Adjusted Attributed Equity.

Adjusted After-tax Income Attributable to Core is derived by subtracting attributed interest expense and income tax expense from adjusted pre-tax income. Attributed debt and the related interest expense is calculated based on AIG’s internal capital model. Tax expense or benefit is calculated based on an internal attribution methodology that considers among other things the taxing jurisdiction in which the segments conduct business, as well as the deductibility of expenses in those jurisdictions.

Adjusted Revenues exclude Net realized capital gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes). Adjusted revenues is a GAAP measure for AIG’s operating segments.

 

10


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

AIG uses the following operating performance measures because AIG believes they enhance the understanding of the underlying profitability of continuing operations and trends of AIG’s business segments. AIG believes they also allow for more meaningful comparisons with AIG’s insurance competitors. When AIG uses these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis.

Adjusted Pre-tax Income (APTI) is derived by excluding the following items from income from continuing operations before income tax. This definition is consistent across AIG’s segments. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to AIG’s current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that AIG believes to be common to the industry. APTI is a GAAP measure for AIG’s operating segments.

 

    changes in fair value of securities used to hedge guaranteed living benefits;

 

    changes in benefit reserves and deferred policy acquisition costs (DAC), value of business acquired (VOBA), and sales inducement assets (SIA) related to net realized capital gains and losses;

 

    loss (gain) on extinguishment of debt;

 

    net realized capital gains and losses;

 

    non-qualifying derivative hedging activities, excluding net realized capital gains and losses;

 

    income or loss from discontinued operations;

 

    pension expense related to a one-time lump sum payment to former employees;
    income and loss from divested businesses;

 

    non-operating litigation reserves and settlements;

 

    restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify AIG’s organization;

 

    the portion of favorable or unfavorable prior year reserve development for which AIG has ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain; and

 

    net loss reserve discount benefit (charge).
 

 

Adjusted After-tax Income Attributable to AIG (AATI) is derived by excluding the tax effected APTI adjustments described above and the following tax items from net income attributable to AIG:

 

    deferred income tax valuation allowance releases and charges;

 

    changes in uncertain tax positions and other tax items related to legacy matters having no relevance to AIG’s current businesses or operating performance; and

 

    net tax charge related to the enactment of the Tax Cuts and Jobs Act (Tax Act).

See page 12 for the reconciliation of Net income attributable to AIG to Adjusted After-tax Income Attributable to AIG.

Ratios: AIG, along with most property and casualty insurance companies, uses the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses

 

11


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. AIG’s ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios.

Accident year loss and combined ratios, as adjusted: both the accident year loss and combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural and man-made catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and also include certain man-made events, such as terrorism and civil disorders that meet the $10 million threshold. AIG believes the as adjusted ratios are meaningful measures of AIG’s underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. AIG also exclude prior year development to provide transparency related to current accident year results.

Underwriting ratios are computed as follows:

 

  a) Loss ratio = Loss and loss adjustment expenses incurred ÷ Net premiums earned (NPE)

 

  b) Acquisition ratio = Total acquisition expenses ÷ NPE

 

  c) General operating expense ratio = General operating expenses ÷ NPE

 

  d) Expense ratio = Acquisition ratio + General operating expense ratio

 

  e) Combined ratio = Loss ratio + Expense ratio

 

  f) Accident year loss ratio, as adjusted (AYLR) = [Loss and loss adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-) Reinstatement premiums (RIPs) related to catastrophes +/(-) RIPs related to prior year catastrophes + (Additional) returned premium related to PYD on loss sensitive business + Adjustment for ceded premiums under reinsurance contracts related to prior accident years]

 

  g) Accident year combined ratio = AYLR + Expense ratio

 

  h) Catastrophe losses (CATs) and reinstatement premiums = [Loss and loss adjustment expenses incurred – (CATs)] ÷ [NPE +/(-) RIPs related to catastrophes] – Loss ratio

 

  i) Prior year development net of (additional) return premium related to PYD on loss sensitive business = [Loss and loss adjustment expenses incurred – Prior year loss reserve development unfavorable (favorable) (PYD), net of reinsurance] ÷ [NPE +/(-) RIPs related to prior year catastrophes + (Additional) returned premium related to PYD on loss sensitive business] – Loss ratio

Results from discontinued operations are excluded from all of these measures.

#        #         #

 

12


 

LOGO

  

FOR IMMEDIATE RELEASE                

 

American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today AIG member companies provide a wide range of property casualty insurance, life insurance, retirement products, and other financial services to customers in more than 80 countries and jurisdictions. These diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIGinsurance www.twitter.com/AIGinsurance | LinkedIn: www.linkedin.com/company/aig. These references with additional information about AIG have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.

 

13


American International Group, Inc.

Selected Financial Data and Non-GAAP Reconciliation

($ in millions, except per share data)

Reconciliations of Adjusted Pre-tax and After-tax Income (Loss)

 

     Three Months Ended December 31,  
     2017     2016  
     Pre-tax     Tax Effect     After-tax     Pre-tax     Tax Effect     After-tax  

Pre-tax income (loss)/net income (loss), including noncontrolling interests

   $ 875     $ 7,544     $ (6,673   $ (3,455   $ (985   $ (2,485

Noncontrolling interest

     —         —         13       —         —         (556
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-tax income (loss)/net income (loss) attributable to AIG

     875       7,544       (6,660     (3,455     (985     (3,041

Adjustments:

            

Changes in uncertain tax positions and other tax adjustments

     —         (461     461       —         247       (247

Deferred income tax valuation allowance charges

     —         (66     66       —         (87     87  

Impact of Tax Act

     —         (6,687     6,687       —         —         —    

Changes in fair value of securities used to hedge guaranteed living benefits

     (29     (10     (19     150       53       97  

Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains (losses)

     (108     (38     (70     (286     (100     (186

Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements

     45       15       30       (27     (10     (17

(Gain) loss on extinguishment of debt

     (1     (1     —         (2     —         (2

Net realized capital losses

     274       105       169       1,115       344       771  

Noncontrolling interest on net realized capital losses

     —         —         1       —         —         (21

Loss from discontinued operations

     —         —         3       —         —         36  

Income from divested businesses

     (241     (82     (159     (194     (186     (8

Non-operating litigation reserves and settlements

     (43     (15     (28     2       1       1  

Net loss reserve discount (benefit) charge

     (96     (36     (60     (750     (263     (487

Pension expense related to a one-time lump sum payment to former employees

     10       4       6       147       51       96  

Restructuring and other costs

     154       55       99       206       72       134  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted pre-tax income (loss)/Adjusted after-tax income (loss)

   $ 840     $ 327     $ 526     $ (3,094   $ (863   $ (2,787
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Twelve Months Ended December 31,  
     2017     2016  
     Pre-tax     Tax Effect     After-tax     Pre-tax     Tax Effect     After-tax  

Pre-tax income (loss)/net income (loss), including noncontrolling interests

   $ 1,466     $ 7,526     $ (6,063   $ (74   $ 185     $ (288

Noncontrolling interest

     —         —         (21     —         —         (561
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-tax income (loss)/net income (loss) attributable to AIG

     1,466       7,526       (6,084     (74     185       (849

Adjustments:

            

Changes in uncertain tax positions and other tax adjustments

     —         (488     488       —         63       (63

Deferred income tax valuation allowance charges

     —         (43     43       —         (83     83  

Impact of Tax Act

     —         (6,687     6,687       —         —         —    

Changes in fair value of securities used to hedge guaranteed living benefits

     (146     (51     (95     (120     (42     (78

Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains (losses)

     (303     (106     (197     (195     (68     (127

Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements

     303       106       197       (42     (15     (27

(Gain) loss on extinguishment of debt

     (5     (2     (3     74       26       48  

Net realized capital losses

     1,380       506       874       1,944       561       1,383  

Noncontrolling interest on net realized capital losses

     —         —         7       —         —         (61

(Income) loss from discontinued operations

     —         —         (4     —         —         90  

Income from divested businesses

     (68     (41     (27     (545     (309     (236

Non-operating litigation reserves and settlements

     (129     (45     (84     (41     (14     (27

Net loss reserve discount (benefit) charge

     187       65       122       (427     (150     (277

Pension expense related to a one-time lump sum payment to former employees

     60       21       39       147       51       96  

Restructuring and other costs

     413       145       268       694       243       451  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted pre-tax income/Adjusted after-tax income

   $ 3,158     $ 906     $ 2,231     $ 1,415     $ 448     $ 406  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

14


American International Group, Inc.

Selected Financial Data and Non-GAAP Reconciliation (continued)

($ in millions, except per share data)

Summary of Key Financial Metrics

 

     Three Months Ended December 31,     Twelve Months Ended December 31,  
                 % Inc.                 % Inc.  
     2017     2016     (Dec.)     2017     2016     (Dec.)  

Income (loss) per common share:

            

Basic

            

loss from continuing operations

   $ (7.33   $ (2.93     (150.2 )%    $ (6.54   $ (0.70     NM

Loss from discontinued operations

     —         (0.03     NM       —         (0.08     NM  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net loss attributable to AIG

   $ (7.33   $ (2.96     (147.6   $ (6.54   $ (0.78     NM  
  

 

 

   

 

 

     

 

 

   

 

 

   

Diluted

            

loss from continuing operations

   $ (7.33   $ (2.93     (150.2   $ (6.54   $ (0.70     NM  

Loss from discontinued operations

     —         (0.03     NM       —         (0.08     NM  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net loss attributable to AIG

   $ (7.33   $ (2.96     (147.6   $ (6.54   $ (0.78     NM  
  

 

 

   

 

 

     

 

 

   

 

 

   

Adjusted after-tax income (loss) attributable to AIG per diluted share (a)

   $ 0.57     $ (2.72     NM   $ 2.34     $ 0.36       NM

Weighted average shares outstanding:

            

Basic

     908.1       1,023.9         930.6       1,091.1    

Diluted (a)(b)

     908.1       1,023.9         930.6       1,091.1    

Return on equity (c)

     (38.7 )%      (14.7 )%        (8.4 )%      (1.0 )%   

Adjusted return on equity (d)

     4.2     (18.2 )%        4.1     0.6  

 

As of period end:

   December 31, 2017      December 31, 2016  

Total AIG shareholders’ equity

   $ 65,171      $ 76,300  

Accumulated other comprehensive income (AOCI)

     5,465        3,230  
  

 

 

    

 

 

 

Total AIG shareholders’ equity, excluding AOCI

     59,706        73,070  

Deferred tax assets

     10,492        14,770  
  

 

 

    

 

 

 

Total adjusted AIG shareholders’ equity

   $ 49,214      $ 58,300  
  

 

 

    

 

 

 

 

As of period end:

   December 31, 2017      December 31, 2016      % Inc. (Dec.)  

Book value per common share (e)

   $ 72.49      $ 76.66        (5.4 )% 

Book value per common share, excluding AOCI (f)

   $ 66.41      $ 73.41        (9.5

Adjusted book value per common share (g)

   $ 54.74      $ 58.57        (6.5

Total common shares outstanding

     899.0        995.3     

Financial highlights - notes

 

(a) For the quarters ended December 31, 2017 and 2016, because we reported net losses and for the quarter ended December 31, 2016, because we reported an adjusted after-tax loss, all common stock equivalents are anti-dilutive and are therefore excluded from the calculation of diluted shares and diluted per share amounts, and for the twelve months ended December 31, 2017 and 2016, because we reported net losses, all common stock equivalents are anti-dilutive and are therefore excluded from the calculation of diluted shares and diluted per share amounts. We reported an adjusted after-tax income for the three months ended December 31, 2017, and years ended December 31, 2017 and 2016; therefore, we reported earnings per share on diluted basis. For the three months ended December 31, 2017 and years ended December 31, 2017 and 2016, the weighted average outstanding shares - diluted includes 20,155,385, 22,412,682 and 30,326,772 dilutive shares, respectively.
(b) Diluted shares in the diluted EPS calculation represent basic shares for the three months ended December 31, 2017 and 2016 and twelve months ended December 31, 2017 and 2016 due to the net loss in that period.
(c) Computed as Annualized net income (loss) attributable to AIG divided by average AIG shareholders’ equity. Equity includes AOCI and DTA.
(d) Computed as Annualized Adjusted after-tax Income attributable to AIG divided by Adjusted Shareholders’ Equity.
(e) Represents total AIG shareholders’ equity divided by Total common shares outstanding.
(f) Represents total AIG shareholders’ equity, excluding AOCI, divided by Total common shares outstanding.
(g) Represents Adjusted Shareholders’ Equity, divided by Total common shares outstanding.

 

15


American International Group, Inc.

Selected Financial Data and Non-GAAP Reconciliation

($ in millions, except per share amounts)

Reconciliations of Core Adjusted Return on Equity

 

     Three Months Ended  
     December 31,  
     2017     2016  

Adjusted pre-tax income (loss)

   $ 429     $ (4,195

Interest expense (benefit) on attributed financial debt

     (31     (45
  

 

 

   

 

 

 

Adjusted pre-tax income (loss) including attributed interest expenses

     460       (4,150

Income tax expense (benefit)

     198       (1,265
  

 

 

   

 

 

 

Adjusted after-tax income (loss)

     262       (2,885

Ending adjusted attributed equity

   $ 39,931     $ 47,651  

Average adjusted attributed equity

   $ 40,841     $ 50,302  

Adjusted return on attributed equity

     2.6     (22.9 )% 

Reconciliations of Accident Year Loss Ratio, as Adjusted and Combined Ratio, as Adjusted

 

     Twelve Months Ended  
     December 31,  
     2017     2016  

Total General Insurance

    

Loss ratio

     83.2       84.8  

Catastrophe losses and reinstatement premiums

     (16.1     (4.4

Prior year development

     (4.0     (18.5

Adjustment for ceded premium under reinsurance contract

     (0.1     —    
  

 

 

   

 

 

 

Accident year loss ratio, as adjusted

     63.0       61.9  
  

 

 

   

 

 

 

Combined ratio

     117.3       118.9  

Catastrophe losses and reinstatement premiums

     (16.1     (4.4

Prior year development

     (4.0     (18.5

Adjustment for ceded premium under reinsurance contract

     (0.1     —    
  

 

 

   

 

 

 

Accident year combined ratio, as adjusted

     97.1       96.0  
  

 

 

   

 

 

 

 

16

LOGO

Press Release

AIG

175 Water Street

New York, NY 10038

www.aig.com

Exhibit 99.2

FOR IMMEDIATE RELEASE

Contacts:

Liz Werner (Investors): 212-770-7074; elizabeth.werner@aig.com

Fernando Melon (Investors): 212-770-4630; fernando.melon@aig.com

Samantha Ebinger (Media): 212-770-8433; samantha.ebinger@aig.com

AIG BOARD OF DIRECTORS DECLARES COMMON STOCK DIVIDEND OF $0.32 PER SHARE

NEW YORK, February 8, 2018 – American International Group, Inc. (NYSE: AIG) today announced that its Board of Directors declared a quarterly dividend of $0.32 per share on AIG Common Stock, par value $2.50 per share. The dividend is payable on March 29, 2018, to stockholders of record at the close of business on March 15, 2018.

This dividend will result in an adjustment to the exercise price of the outstanding Warrants (CUSIP number 026874156) and an adjustment to the number of shares of AIG Common Stock receivable upon Warrant exercise. The exact adjustments, determined by a formula set forth in the Warrant Agreement, will become calculable on or around March 13, 2018. Once the adjustments are determined, AIG will announce the actual adjustment to the Warrant exercise price and shares receivable. Further information on the Warrants and the adjustments is available in the Investor Relations section of AIG’s website.

#    #    #

Certain statements in this press release constitute forward-looking statements. These statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. It is possible that actual results will differ, possibly materially, from the anticipated results indicated in these statements. Factors that could cause actual results to differ, possibly materially, from those in the forward-looking statements are discussed throughout AIG’s periodic filings with the SEC pursuant to the Securities Exchange Act of 1934.

American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today AIG member companies provide a wide range of property casualty insurance, life insurance, retirement products, and other financial services to customers in more than 80 countries and jurisdictions. These diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIGinsurance www.twitter.com/AIGinsurance | LinkedIn: www.linkedin.com/company/aig. These references with additional information about AIG have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.

 

Categories

SEC Filings